What Defines a Discount in Finance?

In finance and investing, discount refers to a situation when a bond is trading for lower than its par or face value. The discount equals the difference between the price paid for a security and the security’s par value. Bonds are usually fixed-income, debt securities used when a business is raising funds for a project or expansion. Bonds may trade at a discount due to problems with the underlying company or the product offering a lower interest rate or terms than other, comparable bonds.